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WealthScapes 2016 Reveals Continuing Improvement in Canadians’ Finances

Vancouver is Nation’s First “City of Millionaires”

Toronto, September 6, 2016 – Canadians saw their financial fortunes improve last year, as rising asset values increased their net worth and modest borrowing kept their debt levels in check. While household net worth rose 4.3 percent over the previous year to $680,098, household debt grew at a slightly slower pace of 4.1 percent, averaging $133,170. Overall, 2015 proved to be a good year for Canadian balance sheets despite challenging market conditions, according to a new analysis of WealthScapes 2016, the fiscal database released today by Environics Analytics (EA).

Based on 178 key financial and investment statistics updated to December 2015, the analysis reveals the uneven impact of the global drop in oil prices across Canada. In the oil-rich provinces of Saskatchewan and Newfoundland and Labrador, households saw their net worth rise at weak levels—by 1.1 percent and 1.8 percent, respectively—while those in Alberta saw a 0.7 percent decline. Meanwhile, in Ontario, Quebec and British Columbia, the devaluation of the Canadian dollar helped buoy the export sector, and as result, household net worth rose by a robust 5.2 percent, 5.0 percent and 6.3 percent, respectively.

Increasing real estate values also played a role in the financial gains of several provinces and their largest cities. In B.C., the red-hot real estate market fueled a rise in average net worth, producing Canada’s first “city of millionaires”: Vancouver. In 2015, the average net worth of Vancouver households hit $1,036,202—an impressive 7.1 percent increase over the previous year. Nationwide, the value of real estate rose by a measured 4.6 percent to $421,506, although the growth was concentrated in the Greater Vancouver Area and the Golden Horseshoe in Ontario.

This fiscal snapshot emerged from data in WealthScapes 2016, now in its ninth year documenting the financial well-being of Canadian households. Despite recent concerns related to the oil market, the new data suggest that households have steadily improved their balance sheets and are weathering the economic challenges. Canadian households increased their savings and investments last year—by 4.3 percent and 2.2 percent, respectively—while maintaining restraint when taking on consumer and credit card debt, which grew by 1.6 percent and 1.4 percent, respectively.

“Despite some economic hardship in the oil provinces, Canada overall is humming along,” says Peter Miron, vice president of economic data at EA and the lead developer of WealthScapes 2016. “We aren’t seeing any wild growth in household income, but nor are we seeing dramatic declines in income or wealth. Among most segments of the Canadian population, we’re seeing pretty consistent growth in net worth.”

EA, the Toronto-based marketing and analytical services company, created WealthScapes to help financial institutions, retailers, charities and universities analyze the fiscal health of current and potential customers, identify promising markets and develop business strategies. The 2016 release includes data on employer pension plans, investment funds, consumer debt and tax-free savings accounts. As with previous releases, WealthScapes was built using sophisticated modelling techniques and aggregated, privacy-compliant, small-area data from a variety of authoritative sources, such as the Bank of Canada, Equifax and Statistics Canada.

Among the noteworthy findings coming out of the WealthScapes 2016 release:

Major Metropolitan Areas

1. Realignment of Wealthiest Cities: For years, the three Canadian cities with the highest net worth were Vancouver, Calgary and Toronto. No longer. While Vancouver continues to reign as the city with the highest net worth ($1,036,202), Calgary’s net worth of $898,240 represents a 2.5 percent decrease over the previous year—the largest decline among Canada’s 20 largest cities—and resulted in its two-rung drop from second to fourth place. Meanwhile, Toronto moved up one rung to the second wealthiest city, with net worth up 5.4 percent to $962,993. Victoria joins the big three with its net worth at $912,362, up 3.4 percent over the previous year. Calgary’s tumble largely can be attributed to a 4.7 percent decline in real estate values somewhat allayed by a low 0.4 percent growth in household debt.

2. Pricey Real Estate Creates Millionaire City: With real estate values that rose 11.9 percent to $786,784—both figures the highest among Canada’s twenty largest cities—Vancouver is the first city to claim an average household net worth of over $1 million. Its 7.1 percent growth in net worth—to $1,036,202—was second only to a southern Ontario newcomer among Canada’s wealthiest markets: Oshawa. But relying on real estate to fuel net worth growth in Vancouver may need to be reconsidered. “While we expect real estate in Vancouver to continue to rise overall in 2016,” says Miron, “the introduction of the recent land transfer tax on foreign nationals may dampen demand for real estate in the future.”

3. Wealth Grows Fastest in Oshawa: The WealthScapes analysis shows that Oshawa households posted the greatest percentage gains in wealth last year, with net worth increasing 9.2 percent to $714,040. The local economy benefitted from a weak loonie and low interest rates, which provided a boon to the area’s manufacturing industry. Oshawa’s real estate holdings grew by 10.5 percent—more than double the 4.6 percent national average—to $507,116, and pensions grew by an above-average 6.2 percent, to $208,416.

4. Few Signs of a Too-Bubbly Real Estate Market: Although real estate markets in Vancouver and Toronto remained hot—the value of real estate holdings rose 11.9 percent in Vancouver and 8.0 percent in Toronto—WealthScapes found no significant drop-off in demand. Several cities in the oil provinces, like Calgary, St. John’s, Regina and Saskatoon, all saw their real estate values decline last year (-4.7 percent, -3.3 percent, -1.6 percent and -1.1 percent, respectively). But households there have not experienced an accompanying sharp drop in income or rise in unemployment. “The data suggest that the real estate market in these cities became a little overheated during the pre-oil devaluation boom,” says Miron. “With no sign of an imminent return to $100-a-barrel oil, these real estate markets are likely to remain cooler over the near term.”

5. Oil’s Decline Produces More Pain in Cities than Rural Areas: While analysts expected rural communities near oil fields to experience the greatest financial decline, the biggest declines actually occurred in cities that are home to the administrative and financial workers who support the oil industry. In Calgary, Saskatoon and Regina, net worth fell 2.5 percent, 1.6 percent and 0.4 percent, respectively, as the value of real estate holdings fell and savings rates faltered.  

Provincial Trends

6. Rich Getting Richer, Mostly: The three wealthiest provinces in 2015 were the same as they’ve been for years: British Columbia, Ontario and Alberta. The net worth of top-ranked B.C. grew 6.3 percent to $883,049, second-place Ontario (formerly ranked third) rose 5.2 percent to $793,338 and third-place Alberta (formerly in second) declined 0.7 percent to $763,812. The drivers behind these changing fortunes differ, however. B.C. remains the wealthiest in large part because of its sizzling real estate market, up 9.5 percent to $628,915 and whose growth is largely centred in Vancouver. Ontario’s net worth growth was evenly spread among pensions, liquid assets and above-average real estate growth (up 4.4 percent, 3.4 percent and 6.5 percent, respectively). Albertans’ net worth declined largely due to a 2.1 percent drop in real estate values and a below-average growth of 1.0 percent in liquid assets.

7. Quebec’s Very Good Year: Despite a relatively quiet real estate market, up only 1.4 percent, Quebec still recorded an above-average net worth growth of 5.0 percent to $478,766. Its rising fortunes were driven mostly by an increase in pensions, up 7.5 percent to $134,507, and the fastest-growing liquid asset portfolios in Canada: an increase of 6.1 percent to $185,533. In addition, Quebec’s households saved an eye-popping $15,144 on average in 2015, with liquid assets swelling by 6.1 percent to $185,533. At the same time, household debt increased only 0.8 percent to $92,258, the lowest rate of growth in the country.

8. Alberta’s Turbulence: While Alberta remains one of Canada’s wealthiest provinces, a trio of factors contributed to its 0.7 percent decline in net worth: real estate values dropped 2.0 percent, pensions grew at a slightly below-average rate of 4.4 percent and liquid assets grew by only 1.0 percent, also well below the national average of 3.0 percent. Alberta’s liquid assets suffered from a double punch of below-average savings rates and a preference for investment funds and stocks in a year when Canadian markets performed poorly. Offsetting these declines, Alberta households’ debt grew modestly, up 2.3 percent.

9. Pumped-Up Pensions: With most attention in recent years focused on the real estate market, savings rates and stock market performance, it’s easy to miss Canadians’ most valuable asset: their increasing longevity. The fastest-growing asset has been Canadians’ employer-sponsored pension plans, up 5.7 percent nationally to $140,204. Pension plans, predominantly the fixed-benefit type, have swelled as long-term interest rates continue to decline and life expectancies continue to rise—a win-win for the 53.9 percent of households maintaining one or more pensions. Pension values grew the most in Manitoba and the Atlantic provinces, up 8.4 percent and 8.3 percent, respectively.

National Trends

10. Debt Grew Faster Than Income: Nationally, debt levels grew at a slightly higher rate than previous years, increasing 4.1 percent to $133,170 per household in 2015. Unfortunately, household income grew only 3.2 percent. But the increase in debt was due less to consumer debt, which rose a modest 1.6 percent, and more to lower-interest mortgage debt, which jumped 5.1 percent to $94,867. “While debt levels have continued to grow, total interest payments have declined relative to incomes,” says Miron. “The spectre of higher interest rates, which could make these debt loads untenable, has simply not materialized yet.”

11. A Rising Tide: As in the past, EA analysts broke the national data into five wealth tiers to assess the relative finances of different segments of the population. For 2015, most quintiles grew at the same pace—between 4.0 percent and 4.4 percent. While real estate fueled gains in the top quintile, real estate and pensions boosted the second quintile, pension growth alone supported the third and fourth quintiles, and active savers helped increase wealth in the bottom quintile. “There was little correlation between net worth and growth in the quintiles in 2015,” says Miron. “Beyond some regional variation, all economic segments of the Canadian population did modestly well.”

12. Future: Few Signs of Recession: Although several oil-based provinces are still experiencing economic headwinds, WealthScapes data indicate little evidence of a recession. All the provinces except Alberta reported growth in net worth—ranging from 1.1 percent in Saskatchewan to 6.3 percent in British Columbia—and wealth in Alberta declined less than 1 percent. Of the twenty largest cities, only Calgary, Saskatoon and Regina experienced a decline in net worth, down 2.5 percent, 1.6 percent and 0.4 percent, respectively. “We’re in a period of low growth, but growth nonetheless,” says Miron. “Overall, Canada is on course to continue modest but steady growth, with few obvious indicators of volatility on the horizon.”

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Maps based on WealthScapes 2016 are available from Julia Vasilev, senior marketing manager of Environics Analytics: 416.969.2733 or julia.vasilev@environicsanalytics.ca.